Multi-Billion Dollar B2B Distributor

Overview

Our client is a multi-billion dollar, growing B2B distributor business unit of a conglomerate that does $20+ billion in revenue annually. Through more than 65 years of operation, it has expanded to over 200 locations with a thousands-strong fleet of vehicles and thousands of employees.

Client Challenge

At present, the business is focused on maintaining its gross margins in a highly competitive environment. Over the last few years, the client’s industry has been experiencing accelerating consolidation, with several of its largest national competitors merging with and acquiring each other.

Additionally, the active threat of a large platform company entering the industry had the client unsure of the future landscape. The client’s fiercest competitors in each region has historically been local mom-and-pop shops, but this was changing.

The client’s executive team needed guidance on how to approach its digital transformation in the presence of a marketplace threat from a modern monopoly.

Having worked with us on software development projects previously, the client engaged Applico for its platform business model expertise to help it navigate its digital transformation and the changing industry landscape.

Applico’s Solution

In order to execute on platform innovation, the client needed alignment on the threat represented by a modern monopoly entering their industry.

The client’s executive team lacked a full understanding of how this new platform entrant would impact the client’s business. To demonstrate the potential threat, we combined the market research and business model design done throughout the engagement to build a custom financial model for the client mapping out the path to profitability for a new platform business in the industry over the next several years.

In addition, we built a model that demonstrated the likely scenarios for what the client’s business would look like over the next five to seven years if it opted to ignore the platform component of market disruption, and chose to pursue traditional, linear digital initiatives as its defensive strategy instead.

Since a platform competitor clearly threatened the client’s core business model, the client’s executive team agreed to pursue an offensive option rather than trying to consolidate its position via traditional acquisitions.

A platform business was a radical departure from the client’s existing business model, so Applico worked with the client to help it decide the best route to pursue platform innovation, via either building a new platform, acquiring a platform startup, or investing in an existing platform.

To inform this decision build it vs buy it decision, we built the business case for how to scale a platform in the client’s industry. This business case detailed what the ideal platform business would look like in client’s industry. It also provided the roadmap either for building a platform business or for integrating and evolving an acquired one.

Outcome

According to the executive who was the client’s lead for the engagement, “Applico’s inspired thought leadership has helped us answer a fundamental question we have struggled with for years. Namely, how do we develop a strategic response to impending platform attacks to our industry?”

Applico’s Platform Design process enabled the client to get buy-in on pursuing a platform business opportunity from the full chief executive team. In addition, the client’s chief executive chose to also escalate the findings of the engagement to the holding company to broaden the scope of the conversation beyond our client’s own business unit.

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